Serendip­ity?

Finweek English Edition - - INSIGHT - Amcu pres­i­dent Joseph Mathun­jwa dur­ing a wage in­crease strike in Marikana on 23 Jan­uary David McKay

Strikes in South Africa’s min­ing sec­tor used to be sea­sonal. Now they’re a peren­nial fea­ture of busi­ness as the shape of the coun­try’s or­gan­ised labour con­tin­ues to change, and rapidly.

The lat­est twist is the re­ported weak­ness of the As­so­ci­a­tion of Minework­ers & Con­struc­tion Union (Amcu), the union that usurped the Na­tional Union of Minework­ers (Num) in the plat­inum sec­tor last year and now, so the ru­mours go, is set to be usurped it­self.

Given its ide­o­log­i­cally-driven and some­what re­cal­ci­trant lead­er­ship, the de­cline of Amcu could be re­garded as a pos­i­tive de­vel­op­ment for in­vestors.

How­ever, that would be to ig­nore the threat of what may re­place Amcu. Yet more rad­i­cal labour or­gan­i­sa­tions are wait­ing in the wings, such as the Work­ers and So­cial­ist Party (Wasp) and the EFF.

A re­turn to worker com­mit­tees is another pos­si­ble de­vel­op­ment if Amcu’s grip on some 60% of the plat­inum work­force weak­ens. Ac­cord­ing to one Jo­han­nes­burg in­vest­ment an­a­lyst, worker com­mit­tees are hard for man­age­ment to tackle be­cause of their in­her­ent lack of struc­ture.

In the mean­time, there are wage ne­go­ti­a­tions to be had. At the time of writ­ing, the Amcu was still at­tempt­ing to lever the coun­try’s plat­inum and gold mines into award­ing a R12 500 per month ba­sic salary for en­try-level work­ers and up­wards. If ac­cepted, this would be equal to a 40% in­crease and is clearly far from the 8%-9% of­fer set down by the com­pa­nies.

Jo­han Theron, head of cor­po­rate af­fairs for Im­pala Plat­inum, thinks that de­mands of this scale will con­tinue, and that the days of inf la­tion-re­lated salary in­creases are over. The ef­fect will be to pres­sure man­age­ment in medium-term re­struc­tur- ing. “We will have a much smaller plat­inum in­dus­try in the fu­ture. A lot of the mar­ginal mines have closed. We will see what else will fall over.”

Higher-than-bud­geted wage in­creases are there­fore net pos­i­tive for the plat­inum price, a view shared by Mac­quarie Re­search in a re­cent note: “We re­main of the view that th­ese events are price pos­i­tive more in the medium term as they in­crease the cost base of the in­dus­try and re­duce in­vest­ment in fu­ture pro­duc­tive ca­pac­ity.”

Ul­ti­mately, this will en­cour­age the plat­inum price, which is also be­ing as­sisted by more signs of green shoots. In fact, it’s the slow but sure re­cov­ery of de­vel­oped mar­kets that is ham­mer­ing the rand so hard as in­vestors re­de­ploy their funds by with­draw­ing from emerg­ing mar­kets.

The weak­ness in the rand is not thought to be strike-re­lated – which is good news for the min­ing sec­tor – but hitched to more fun­da­men­tal is­sues such as f light of cap­i­tal away from emerg­ing mar­kets as de­vel­oped economies start to im­prove.

A weaker rand is a short-term trig­ger for min­ing com­pa­nies, and if de­vel­oped mar­kets are start­ing to re­cover, that means the man­u­fac­ture of au­to­cat­a­lysts us­ing plat­inum will also im­prove, which is pos­i­tive for min­ing firms. It’s per­haps this think­ing that is be­hind the pop­u­lar­ity of plat­inum­backed ETFs. Hold­ers of th­ese se­cu­ri­ties would have en­joyed the re­cent rally in the plat­inum price, up about $70 per ounce un­til Jan­uary 21 when it fell back to about $1 140/oz, a $30/oz de­cline.

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